An alarming 80 per cent of property owners are underinsured according to data from the Insurance Council of Australia.
While some may underinsure their property on purpose, believing that an event may never happen to save on costs; there are many home owners and investors that are unaware that they may be underinsured.
It is important to regularly review your insurance policies to ensure that you are adequately covered, and the policy terms are still the same.
When reviewing your cover consider the following:
- Do not include the land value in the insured amount.
- Have you made any renovations, alterations or additions to the property? These should be factored into the sum insured.
- What is the current replacement building cost? This is not market value, but the current cost of building the same premises again. This value needs to reflect the costs involved in restoring the property to its existing condition, considering current building standards and codes, and factoring in rising costs due to inflation, labour, etc. To get an accurate estimate of replacement costs, we recommend that you speak with a quantity surveyor or builder or there are online building replacement calculators.
- Have you added to your possessions, fixtures and fittings?
- Has the way you rent out the property changed? For example: changed from short-term to fixed-term, or vice versa.
- If the type of lease has changed, it is imperative that the type of insurance policy is changed too, as different policies suit different situations and landlords may find themselves inadequately insured for their needs.
- Has the rent increased? If the weekly rent has increased significantly (for example, exceeds $1,500 per week), you may need to contact your insurer and discuss if this affects your policy in any way?
If disaster strikes, landlords can find themselves in financial trouble if they have failed to update their insurances. Take the time now to review your insurance cover.